The first nationwide crackdown on P2P lending in China is underway — and expected to eliminate many of the 2,400 or so leading platforms in the nation.

The crackdown comes following a series of multi-billion dollar scams in the Chinese P2P lending space, as well as governance issues in U.S. segment leader LendingClub. Chinese regulatory authorities have officially released new guidelines and sent inspection teams to companies to make sure said guidelines are being following. Those that do not comply by August of this year will be shut down.

The new regulations will block lenders from guaranteeing principal or interest on loans they facilitate as well as cap the size of loans for individuals at Rmb1m and at Rmb5m for companies. Lenders going forward will also be required to use custodian banks — which the vast, vast majority do not.

“[There] will be shakeouts, though good for those which are compliant. It will take time for P2Ps to move to custodian banks,” said Roger Ying, founder and chief executive of Beijing-based P2P lender Pandai. “Presumably the most risk for investors is with P2Ps who do not have escrow [or] custodian bank accounts as retail investor sentiment is low.”

The custodian bank requirement is intended to protect investor money.

All in, the clean-up in P2P is so far viewed by investors and analysts as an attempt to reign in the “wild west” of online lending.

With the new rules, “regulators are trying to turn P2P into a supplement of the banking industry [to avoid risks],” says Wu Xianyong, chief executive at Shenzhen-based Touna Financial Services. He reckons many P2P lenders could be forced out of business. “A lot of investors are starting to look at the long-term competitiveness of the platforms and move their money.”